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TMI Blog2021 (4) TMI 893X X X X Extracts X X X X X X X X Extracts X X X X ..... amount, and it cannot be misused to drop curtain on healthy organisation. The Project Skylark Ithaca is being developed by Ithaca Estates Private Limited (IEPL). Even in CIRP initiated in respect of Skylark Mansions Pvt. Ltd., the Resolution Plan proposed by Resolution Applicant is subject to contribution of ₹ 1250/- per sq. ft. only from each customer in order to complete Skylark Ithaca Project. Therefore, it shows, the Corporate Debtor is in a position to complete the project in question - Corporate Debtor, prima facie appears to be solvent Company, which cannot be subjected to insolvency proceedings and it should be given one more opportunity to fulfill its obligations to various Home Buyers, who have substantially contributed to get their flats. The Petitioner has failed to make out even prima facie case so as to initiate CIRP as prayed for - Petition dismissed. - C. P. (IB) No. 201/BB/2020 - - - Dated:- 31-3-2021 - Rajeswara Rao Vittanala, Member (J) And Ashutosh Chandra, Member (T) For the Appellant : Jacob Alexander For the Respondents : Amrita Jain and Ramanathan Bhuvaneshwari ORDER Rajeswara Rao Vittanala, Member (J) 1. C.P. (IB) No. 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sents and approvals in relation thereto. Whilst, the said general power of attorney was executed in favour of SMPL, it was not executed in favour of the Corporate Debtor nor was it delegated to the Corporate Debtor by SMPL. Further, SMPL had also entered into allocation agreements with landowners for sharing of right, title and interests in the land provided for the Project. Subsequently, SMPL and the Corporate Debtor entered into an assignment deed dated March 12, 2013, authorising Corporate Debtor to construct the Project. (4) CP (IB) No. 389/BB/2019 filed by the Petitioner respect of the SMPL was already admitted by initiating CIRP vide Order dated February 7, 2020 on an Application filed by the Financial Creditor herein due to the failure in completion of the project, namely, 'Skylark Ithaca'. (5) The Financial Creditor is an association registered under the provisions of Karnataka Societies Registration Act, 1950. It comprises of more than 250 members, and is a financial creditor in terms of section 5(8)(f) of the Code. SMPL had entered into Joint Development Agreements and Supplemental Agreements with various landowners of Kodigehalli village Kurudu Sonnen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of the apartments would be handed over to different allot tees. The different dates on which these apartments were to be handed over as per the Tripartite Buyer Agreement were March 31, 2017, September 30, 2017, June 30, 2018 and December 31, 2018 as provided under clause 6.1 of the Tripartite Buyer Agreement. However, the Corporate Debtor and SMPL failed to provide possession of the apartments to the buyers in accordance with the timelines set out in the respective agreements. (8) Further, as per Clause 6.4 of the Tripartite Buyer Agreement, the respective allot tees were entitled to receive damages amounting to a sum of ₹ 4/- per square feet, per month for the delayed period in handing over possession of the flats/apartments. In relation to this, the Corporate Debtor and SMPL had convened meetings with the allot tees on September 13, 2018 and September 22, 2018. In these meetings Mr. Saleem Sheriff, Chairman and Managing Director of both companies had promised to hand over the apartments to the allot tees between March 2019 and June 2019. However, they failed to handover the possession of the apartments to respective allot tees, as promised during the above-m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with SMPL for the following reasons: (a) SMPL and the Corporate Debtor are a consortium of companies in relation to construction and development of the Project. (b) The monies paid by the Financial Creditors to SMPL and the Corporate Debtor has been jointly utilised by SMPL and the Corporate Debtor in terms of the Tripartite Buyer Agreement, as a consortium. This aspect is corroborated by financial statement of the Corporate Debtor for the financial year 2018-19. (c) There intertwined transactions between SMPL and the Corporate Debtor, in relation to the Project, including the fact that the development rights, title and interest in relation to the land on which the Project is required to be constructed, is with SMPL, whilst, the right to construct is with the Corporate Debtor. (d) Further, SMPL has provided a corporate guarantee, inter alia, on behalf of the Corporate Debtor in favour of other Financial Creditors. (e) The entire marketing, solicitation of money, representations, selling of units has been done by SMPL. (f) SMPL has obtained approval and a no objection certificate from Bangalore Development Authority and Hindustan Aeronautics Limited i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Buyer Agreement. (14) Subsequently, the Financial Creditor filed C.P. (IB) No. 389/BB/2019, U/s. 7 of Code before this Adjudicating Authority, against SMPL, wherein it was stated that SMPL is liable to pay a sum of ₹ 220,90,27,614 which was on February 7, 2020 by initiating CIRP with consequential directions. 3. The Company Petition is opposed by the Respondent No. 1 by filing Objections dated 14.01.2021 by inter alia contending as follows: (1) The instant Petition is not maintainable as same being infructuous as the Corporate Insolvency Resolution Process as against the Proforma Respondent had already been admitted vide order of this Hon'ble Tribunal dated February 7, 2020 in CP (IB) No. 389/BB/2019, post which the Proforma Respondent has challenged the said admission before the Hon'ble National Company Law Appellate Tribunal, Delhi ( NCLAT ) wherein the NCLAT vide its order dated 10.08.2020 directed the 'Interim Resolution Professional' Mrs. Ramanathan Bhuvaneshwari to ensure that the company remains a going concern. The Hon'ble NCLAT made it clear that its direction is only in respect to project 'Skylark ITHACA' and the said issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by SMPL in favour of Ithaca Estates Private Limited (IEPL) assigning all its rights and obligations with regard to project Skylark Ithaca in favour of this answering Respondent. That in pursuant to deed of assignment dated 12.03.2013, large number of home buyers including Members of Applicant Association during the period 2013-2019, entered into agreement of sale and construction with Respondent Company on different dates. SMPL is the confirming party in the said agreements for the reason that it is the GPA holder of the landowners. That the answering Respondent entered into Contract for Civil Work with L T dated 21.07.2014. Thereafter, the project was registered with RERA Karnataka, holder of landowners. (4) That the answering Respondent had replied to a notice dated 22.07.2019 which was sent to the Corporate Debtor as well as the Proforma Respondent, where it had reiterated the Proforma Respondent had assigned all its rights and obligations to the Corporate Debtor who is developing the Project and Proforma Respondent has no role to play with respect to the development of the Project. (5) That when the Respondent Company was in the process of completing the project, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al creditors and the Proforma Respondent. (8) All the projects of the group cannot be forced to stop for its failure to execute and complete one project. The assets of IEPL cannot be clubbed together with assets of SMPL and maximised for IEPL's failure to execute one project within the timeline. In Flat Buyers Association Winter Hills-77, Gurgaon vs. Umang Realtech Pvt. Ltd. through IRP and Ors., it was held that if the same Real Estate Company has other project in another town, they cannot be clubbed together nor the asset of the Corporate Debtor for such projects can be maximised. (9) The answering Respondent that it is a solvent company. As such, initiation of CIRP is impermissible as against the answering Respondent. The answering Respondent satisfies Cash-Flow Test as well as Balance Sheet Test. The cash flow test is to ascertain whether the company is currently or in future able to pay its debts. The Balance Sheet test is to ascertain whether the value of the company's assets is more than the number of its liabilities after taking into account as-yet uncertain and future liabilities. It has satisfied both the Cash Flow Test as well as the Balance Sheet Test. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . As such, the rights, title and interests in relation to the land on which the project is being constructed are solely vesting in Ithaca Estates Private Limited. Ithaca Estate Private Limited, despite its unwavering and committed efforts to complete the construction of the Project on time, failed to meet the timeline as originally stipulated as multiple homebuyers failed to pay their installments on time. There was a delay in payment of installments by the financial creditors of an approximate sum of ₹ 65 Crores. Further, the Project faced more challenges on account of the gloomy market situation. Thereafter, due to the mala fide and illegal proceedings initiated against SMPL, the project belonging to answering Respondent namely 'Skylark Ithaca is held up and the Respondent Company is not able to execute the said project, due to which large number of buyers who want delivery of flats are suffering. However, since there is requisite cash flow in the company, respondent is solvent enough to complete the project. The project Skylark Ithaca consists of total 19 towers, out of which 11 towers are to be developed in Phase-I and 8 towers are to be developed in Phase-II. The 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liabilities between both the entities. (3) With respect to the bank loans received from ICICI Bank, SMPL is the Corporate Guarantor. An amount of around ₹ 46 Crores of project funds of ICICI Bank was transferred to the holding Company, in addition to ₹ 113 crores transferred for creation of land parcel in the holding Company. The Resolution Plan approved for the project Skylark Ithaca is to get additional contribution of ₹ 1250/- per sq. ft. from each customer, in order to complete the construction, as the money is diverted from project as accounted in IEPL books. The RP is unable to recover the same form the Corporate Debtor holding Company, as the CIRP is restricted to project Skylark Ithaca only. The Directors refuse to provide relevant information about the project Skylark Ithaca, with respect to diversion of funds to group companies/related parties, making it difficult for the undersigned to conduct the CIRP of the project Skylark Ithaca and the very same promoters and Directors of both SMPL and IEPL are absolving their responsibility on this project, after diverting sizable money from the project which was meant for construction of the flats. (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered as a confirming party. The home buyers as per the above agreement had made payments to Corporate Debtor which were utilized by Proforma Respondent and the same is evident from the P L A/c of the Corporate Debtor. CD was merely a contractor, who was appointed by Proforma Respondent to build and develop the Project. The brochure for the Project was also issued by Proforma Respondent which shows that Proforma Respondent was responsible for development of the Project. The Proforma Respondent entered into a development agreement with home buyers through third parties. Due to lack of assets, CD doesn't have enough funds to complete the Project and hence even if the home buyers claim dues from CD, it will not be able to pay. (4) It is stated that the Corporate veil needs to be lifted in the present case as Proforma Respondent and CD are trying to evade the provisions of the Code, as held by Hon'ble Supreme Court in Swiss Ribbons Pvt. Ltd. vs. Union of India. Money paid by homebuyers to CD has been siphoned off by Proforma Respondent and CD is a wholly owned subsidiary of Proforma Respondent. Further, the principle laid down in Flat Buyers Association Winter H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;s failure to execute one project within the timeline owing to the non-payment of the balance amount from the homebuyers. In Flat Buyers Association Winter Hills-77, Gurgaon vs. Umang Realtech Pvt. Ltd. through IRP and Ors., it was inter alia held that the asset of the company (Corporate Debtor - real estate) of that particular project is to be maximized for balancing the creditors such as allot tees, financial institutions and operational creditors of that particular project and the CIRP should be on a project basis as per the plan approved by the Competent Authority. (4) The Hon'ble Apex Court has held in the case of Swiss Ribbons Pvt. Ltd. vs. Union of India, that the object of the Code is to save the Company and not to drive the Company towards liquidation. In tune with the same, when IEPL here is a solvent Company, in a position to complete the construction at the earliest, the delay for which was occasioned owing to delay in payment by the financial creditors of an approximate sum of ₹ 65 Crores, frivolous litigations filed by them against SMPL and the gloomy market situation, the Company ought not to be thrust into CIRP. 8. In the light of rival content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as sought for in the instant Petition. Moreover, the Association has already moved against main Corporate Debtor by inter alia contending that it is the responsibility of Holding Company to get constructed promised houses as per Agreements through its alleged Subsidiary namely M/s. Ithaca Estates India Pvt. Ltd. (the CD herein). It is also relevant to point out here that the Association is also relying on all the averments and documents filed in the connected C.P. (IB) No. 389/BB/2019, which is under Appeal before the Hon'ble NCLAT, wherein several issues raised including CIRP initiated covers entire CD as well as its alleged Subsidiary, wherein an interim order was passed restricting CIRP to the project in question. And the matter is sub judice. Therefore, the instant Petition is not maintainable, and it is filed on misconception of facts and law, and it is filed to cover lapses, which were committed in the earlier company Petition. 11. It is not the case of Association that it not aware of the issues raised in the instant Petition. And the Parties are same except in respect of number of Home Buyers, defaulted amount, etc. After having taken all pleas in the earlier Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary fitting and tiles, etc., for the remaining towers are already procured. The structure of club house which is about 40,000 sq. ft. along with Swimming Pool is completed. In Phase-II of the project, the Respondent Company has completed all the footings, lower basement, and major portion of upper basement. 2 of the 8 towers have reached Ground and First floor. 13. In terms of Assignment Deed dated 12.03.2013 in question, SMPL had assigned all its rights and obligations with regard to Project Skylark Ithaca to IEPL, the first Respondent herein. As per law, once CIRP is initiated in respect of CD, all the claimants of CD have to submit their claims to IRP/RP. Moreover, all the Home Buyers, admittedly are in respect of same Project Skylark Ithaca and they are stated to have made their claims to RP of earlier CP. The issues whether initiation of CIRP in respect of SMPL is justified or not; whether it is in respect of one CD (SMPL) or only in respect of IEPL (CD herein) etc., are issues to be decided in the pending Appeals by the Hon'ble NCLAT, and thus all issues are sub judice. 14. As per law, every incorporated Company has a separate legal entity and having statutory righ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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